Hotel Management Contract: If you are the owner of a hotel, or if you are thinking of buying a hotel accommodation, you will have to think about the business model of exploitation that you will carry out.

Business concentration in the tourism sector erupted years ago, and hotel chains emerged in the hotel sector, grouping together a series of hotels under one brand. The hotel management contract is an option to both hotel chains and property owners who lack of the knowledge to manage a hotel.

In that sense, there are different modalities to integrate hotels into a hotel chain:

1. The owner of the hotel chain is the owner of the hotel (accommodation). In this case, the drawback is that sufficient funds must be available to acquire and maintain the hotel property.
2. The owner of the hotel chain leases the hotel accommodation (the property), through a lease of commercial premises contract (only the property intended for a hotel is leased), or through a business lease agreement (in In this case, the property and all its belongings, facilities and equipment are rented), in which case not only the property is hired, but everything necessary: ​​a hotel business set up and ready to operate from the first moment. In this case, the hotel chain integrates the hotel into its business structure, managing the accommodation in its own name, and assuming the risk of the results it may obtain, in exchange for the payment of an amount as rent.
3. The hotel chain acts as a franchisor, assuming the economic and commercial management of the franchise, as well as the advertising of the brand, and the business owners of the hotel accommodations exploit them under the direction of the franchisor, and under the brand, in exchange for economic compensation.The franchisee manages his hotel accommodation at his own risk, although under the direction of the hotel chain. But, the one who runs the risk of the management is the franchisee, and not the hotel chain.

4. Hotels can be integrated into the hotel chain through a hotel management contract, which is the one we will define in this article. In this type of contract, the owner of the hotel chain manages the hotel in the name and on behalf of the owner of the property (of the hotel), in exchange for economic compensation.Who runs the risk, in this case, is the owner of the hotel (of the property), who is not involved in the management of the hotel because he does not want to, or cannot due to lack of knowledge.

The hotel management contract allows hotel chains to integrate hotels into their business, through the management of hotel properties that they do not own, but have knowledge of hotel business management.

The Hotel Management Contract

The hotel management contract is not regulated in our legal system. It is a commercial contract between two businesspeople.

But in the hotel management contract, the hotel chain has its own and personal interest in that the hotel is managed correctly, so that it is properly integrated into the hotel chain, since improper management would damage the image of the hotel chain itself. But in this management contract, unlike other contracts, the hotel chain does not receive hotel management instructions from the property owner, who does not interfere in such management.

Regarding the duration of the hotel management contract, it is usually a long-term contract (10 years), with periods of successive extensions agreed to of shorter duration (for example 5 years), if neither party communicates its intention to the other to continue bound by said contract, and with sufficient notice (at least one year, typically). It is also typical to agree, in addition, the manager’s right of preference before the owner of the hotel accommodation, at the end of the contract, if he wishes to agree to a new hotel lease, or to a management contract.

The hotel manager can also renounce the management contract (resignation of the representative of art. 1736 of the Spanish Civil Code), provided that it is communicated sufficiently in advance to the owner of the accommodation.

The hotel management contract is usually a long-term contract (about 10 years), which is extended for periods of several years (for example, 5 years periods), and which entails the compensation of the hotel manager, if the property owner decides to terminate it in advance.

And what happens to the hotel manager if the owner of the property wants to sell it?

Normally, in the hotel management contract, the owner of the property can only revoke the action and powers of the contractor hotel manager if the owner decides to sell the accommodation (the hotel).

In that case, the following rules are usually agreed upon:

1. The owner must notify the hotel manager of his intention to sell the property, revoking his management contract, and giving him sufficient advance notice (for example, several months), granting the manager a preferential acquisition right.
2. If the manager does not want to exercise the right of first refusal, then the owner, normally, will have to compensate him for the loss of profit, that is, for the remuneration / profits not received from the moment of the sale of the property until the end of the term agreed in the contract with the manager.

If you want to outsource the hotel management of your property, or if you want to purchase a hotel business, do not hesitate to contact the Pérez Parras Economists & Lawyers Firm. We are experts in hotel contracting(outsourcing of hotel services, sale of real estate and hotel businesses, earnest money contracts, etc.).

#Contract #Management #Hotelier #property #purchase #conveyancing #explotation #adquisition #chain #hotel #Lawyer #Economist #Malaga #Nerja